Final answer:
The objective of Dow Theory is to determine the primary direction of the stock market. It analyzes trends in market indices to predict the general market direction. A rise in supply of loanable funds can increase the quantity of loans made and received.
Step-by-step explanation:
The objective of Dow Theory is to determine c. the primary direction of the stock market. This theory is not focused on market psychology, volume reversals, or timing of market bottoms. Instead, Dow Theory provides a framework for analyzing the overall trend of the market by looking at the performance of market indices, especially the Dow Jones Industrial Average. It emphasizes that markets move in trends which can be identified and used to predict general market direction, but not specific market turns or bottoms.
As to changes in the financial market that lead to an increase in the quantity of loans made and received, a rise in supply or a rise in demand can both contribute to this. However, typically a rise in supply of loanable funds, meaning that more money is available to be loaned out, could more directly result in an increase in the quantity of loans. This is because more funds available typically mean lower interest rates, which in turn stimulates borrowing.